September 1999

Society Responds to AICPA Exposure Draft

Controversy Over New York Supervision Requirement

By James L. Craig, Jr., CPA

The NYSSCPA recently responded to an AICPA exposure draft that recommends changes to quality control standards. Controversy continues over the experience requirement in New York state, and the Society stated its disapproval of the exposure draft's strictly qualitative measure of competency for supervising attest engagements.

The Society's actions have roots in a bill now before the New York State Legislature that incorporates some of the proposals of the AICPA's and National Association of State Boards of Accountancy's Uniform Accountancy Act, including a one-year experience requirement that no longer mandates work in a public accounting firm. The New York bill adopted this approach because the UAA also emphasized specific supervisory requirements, to be set forth in professional standards, for CPAs engaged in attest work.

Currently, to receive a CPA license in New York, candidates must obtain work experience at a public accounting firm under the supervision of a CPA; however, there currently is no mechanism in place to assure the quality of work this experience encompasses.

The AICPA's Auditing Standards Board, which developed the new attest experience requirements, has proposed that these professional standards be set forth in Statements on Quality Control Standards. This will make the supervisory attest experience requirement part of the quality control system and therefore subject to peer review.

"While the ASB's proposal improves current New York state experience requirements by stipulating specific supervisory conditions that are assured through the peer review system, the standards need further steps to better protect the public," NYSSCPA President Alan E. Weiner said.

The AICPA exposure draft takes the position that, in assigning those that are to supervise a particular attest engagement, competency, which is not measured by periods of time, is the determining factor rather than experience.

"We urge the Auditing Standards Board to add a requirement for recent actual attest experience. We think that it is a disservice to the public interest to consider only the qualitative aspects," the Society stated in its comment letter signed by President Alan E. Weiner.

The NYSSCPA objects to the proposal's basic premise that the "measure of overall competency is qualitative rather than quantitative," and that the amount of time a person is exposed to attest engagements need not be a factor in evaluating that person's competency to supervise an attest engagement.

"Important ingredients for the making of an attest professional--professional skepticism and judgment, independence-in-fact, confidence in client relations--are only gained through persistent, long-term exposure to the culture and methodology of a CPA-firm attest practice," the comment letter said.

The Society's letter gives the analogy of flying a helicopter: "If flight regulations were similar to those proposed, you could be deemed competent to fly a helicopter if you sat in the cockpit, read the flight instruction manual, and consulted with an experienced helicopter pilot, but without ever having flown."

The NYSSCPA also requests that the AICPA revise the proposal to clarify exactly to whom the competency requirements apply. The exposure draft states that the competency requirement refers to the practitioner-in-charge who supervises and signs the engagement report.

The Society's comment letter asks a number of questions such as: "If the supervising accountant who does the work is not a CPA, can he or she properly sign the accountant's report? Does the proposal apply to both the practitioner-in-charge and the signer? In those cases where the person supervising the fieldwork is not the person signing the report, which party must possess which competencies--the practitioner-in-charge or the signer?"

A task force of members appointed by President Weiner from a number of technical accounting and auditing committees prepared the comment letter, which the Society's Executive Committee approved. Task force members were Patrick Brennan, Harriet Coorssen, Julie Floch, Thomas Linder, David Pitcher, M. Jacob Renick, Joseph Sciacca, Frank Sluter, Paul Warner, Bob Waxman, and Howard Weiner.